Robeco Global Credits - Short Maturity IH USD

Reinout Schapers is Co-Head Portfolio Management Investment Grade in the Credit team. Prior to joining Robeco in 2011, Reinout worked at Aegon Asset Management where he was a Head of European High Yield. Before that, he worked at Rabo Securities as an M&A Associate and at Credit Suisse First Boston as an Analyst Corporate Finance. Reinout has been active in the industry since 2003. He holds a Master's in Architecture from the Delft University of Technology. Victor Verberk is CIO Fixed Income and Sustainability and Portfolio Manager Investment Grade Credits. Prior to joining Robeco in 2008, Victor was CIO at Holland Capital Management. Before that, he was Head of Fixed Income at MN Services and Portfolio Manager Credits at AXA Investment Managers. He has been active in the industry since 1997. Victor holds a Master’s in Business Economics from Erasmus University Rotterdam and he is a Certified European Financial Analyst. The Robeco Global Credits - Short Maturity fund is managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts (of which four financials analysts). The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team’s fundamental research. Our analysts have long term experience in their respective sectors which they cover globally. Each analyst covers both investment grade and high yield, providing them an information advantage and benefiting from inefficiencies that traditionally exist between the two segmented markets. Furthermore, the credit team is supported by dedicated quantitative researchers and fixed income traders. On average, the members of the credit team have an experience in the asset management industry of seventeen years, of which eight years with Robeco.

The fund is established in Luxembourg and is subject to the Luxembourg tax laws and regulations. The fund is not liable to pay any corporation, income, dividend or capital gains tax in Luxembourg. The fund is subject to an annual subscription tax ('tax d'abonnement') in Luxembourg, which amounts to 0.05% of the net asset value of the fund. This tax is included in the net asset value of the fund. The fund can in principle use the Luxembourg treaty network to partially recover any withholding tax on its income.

Investors who are not subject to (exempt from) Dutch corporate-income tax (e.g. pension funds) are not taxed on the achieved result. Investors who are subject to Dutch corporate-income tax can be taxed for the result achieved on their investment in the fund. Dutch bodies that are subject to corporate-income tax are obligated to declare interest and dividend income, as well as capital gains in their tax return. Investors residing outside the Netherlands are subject to their respective national tax regime applying to foreign investment funds. We advise individual investors to consult their financial or tax adviser about the tax consequences of an investment in this fund in their specific circumstances before deciding to invest in the fund.

The fund incorporates sustainability in the investment process via exclusions, ESG integration, a minimum allocation to ESG-labeled bonds, and engagement. The fund does not invest in credit issuers that are in breach of international norms or where activities have been deemed detrimental to society following Robeco's exclusion policy. Financially material ESG factors are integrated in the bottom-up security analysis to assess the impact on the issuer's fundamental credit quality. In the credit selection the fund limits exposure to issuers with an elevated sustainability risk profile. Furthermore, the fund invests at least 5% in green, social, sustainable, and/or sustainability-linked bonds. Lastly, where issuers are flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to engagement.

The market rally cooled down in February as inflation fears made a comeback. Spreads for the Bloomberg Global Agg Corp 1-5 declined 1 bp in February to 1.07%. Excess return over treasuries was 0.14% for this index. Treasury markets saw more volatility, with 5-year treasury yields rising 56 bps to 4.18%. Inflation fears were revived, triggered by a strong US job market report and unemployment declining to 3.4%. On top of that, CPI numbers were higher than expected and retail sales numbers surprised on the upside. Markets started to expect more tightening from the Fed and US Treasury yields rose over February. In Europe, inflation continues to surprise on the upside. With the economy continuing to do fine, reported corporate earnings were decent over the fourth quarter. The banking sector benefits from higher net interest margins. Only in some sectors like technology hardware, companies are reporting weaker results due to an inventory correction in the market.

Based on transaction prices, the fund's return was -0.90%. The fund's beta position has been around 1 during February and made a small negative contribution. Issuer selection made a positive contribution. This was mainly driven by selection within sectors and not by sector allocation. Selection within the banking sector was the biggest contributor. Positive contributors were Volkswagen and Banco Santander Mexico, while positions in United Rentals and Western Digital made negative contributions.

A hiking cycle often ends in a recession with rates typically peaking before credit spreads do. We believe we are in the valley between the two peaks. Credit spreads have also rallied a lot since mid-October, but are set to re-widen when markets start anticipating a recession that would hit corporate health. This is particularly the case for high yield credits. Markets are starting to price out recession risk, which seems odd given the economic data points. With tighter valuations, we prefer to have only a small long beta position in the portfolio. Although markets have rallied a lot, there are still areas like European investment grade that are cheap.